economic impacts of the millstone power stationthe millstone power station (millstone) is located on...

Economic Impacts of the

Millstone Power Station

An Analysis by the Nuclear Energy Institute January 2017

www.nei.org

Economic Impacts of the Millstone Power Station Page 2

Contents Executive Summary 3 Section 1 Background and Electricity Generation History 5 Section 2 Benefits for State and Regional Economies 7 Section 3 Benefits for State and Regional Economies from Lower Electricity Prices 10 Section 4 Economic Impact Analysis Methodology 12 Conclusion 14

Nuclear Energy Institute

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Executive Summary

The Millstone Power Station (Millstone), located near New London, Connecticut,

has long been a vital part of the region’s energy portfolio, providing 100 percent

carbon-free electricity since Millstone Unit 1 began operating in 1970. In addition

to the reliable, emission-free electricity that the plant generates and the jobs and

economic stimulus it provides, the plant’s involvement in its community also makes

Millstone a significant economic contributor to the state of Connecticut and the

northeastern United States.

To quantify the economic impacts of this facility, the Nuclear Energy Institute

(NEI) conducted an independent analysis. Based on data provided by Dominion

(Millstone’s operator) on employment, operating expenditures and tax payments,

NEI conducted the analysis using the PI+ model provided by Regional Economic

Models, Inc. (REMI), which is a nationally recognized model. (See section 4 of this

report for more information.)

Key Findings

Millstone’s operations provide:

Economic stimulus from operations and lower electricity prices. Millstone

produces significant economic benefits for Connecticut and the rest of New

England, both through its operations and through the lower electricity prices it

supports. NEI’s analysis finds that Millstone generates $2.6 billion in annual

economic output for all of New England. This includes almost $1.3 billion for

Connecticut and more than $1.3 billion for the other states in New England

(Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont).

Economic benefits for Connecticut. The annual additional economic output

Millstone generates for Connecticut includes:

$873 million from station operations

$402 million from lower electricity prices

A total of nearly $1.28 billion in total economic benefits.

Economic benefits for the rest of New England. The annual additional eco-

nomic output Millstone generates for other New England states includes:

$81 million from station operations

$1.25 billion from lower electricity prices

A total of over $1.33 billion in total economic benefits.

Long-term economic stimulus. Additionally, this study finds that between 2016

and 2030, Millstone’s operations will generate over $12 billion in economic

output in Connecticut and $1.3 billion in the rest of New England (not includ-

ing benefits from lower electricity prices). Further the station’s operation con-

Millstone’s operation

and support of low prices

support 4,800 jobs in

Connecticut.

Across New England,

Millstone provides $2.6

billion economic benefits.

Approximately $1.3 billion

of these benefits occur in

Connecticut.


tributes $630 million to Connecticut’s gross state product each year.

Employment benefits from operations and lower electricity prices. Mill-

stone supports thousands of jobs in Connecticut and the rest of New England,

both through its operations and through lower electricity prices. NEI estimates

that the total number of jobs supported by Millstone annually in New England,

including Connecticut, is over 12,100 jobs. That includes almost 4,800 jobs in

Connecticut and more than 7,300 in the rest of New England.

Employment benefits for Connecticut. The annual employment benefits from

Millstone for Connecticut include:

2,737 jobs from station operations

2,062 jobs from lower electricity prices

A total of 4,799 jobs.

Employment benefits for the rest of New England. The annual employment

benefits from Millstone for other New England states include:

523 jobs from station operations

6,784 jobs from lower electricity prices

A total of 7,307 jobs.

Clean electricity for Connecticut and New England. Emission-free electricity

from Millstone prevents the release of 8.3 million metric tons of carbon dioxide

annually, about the same amount of carbon dioxide released by approximately

1.9 million cars every year. For perspective, there are an estimated 1.4 million

passengers cars in Connecticut. These avoided emissions have economic val-

ue. Between 2016 and 2030, Millstone will have provided over $6 billion in

benefits from avoided emissions.

Reliability benefits. During full-power operation, Millstone provides 2,111 mega-

watts of around-the-clock electricity to Connecticut homes and businesses. In

2015, the station operated at 96 percent of capacity, which is above the in-

dustry average and significantly higher than other forms of electric generation.

This reliable production helps offset potential price volatility of other energy

sources (e.g., natural gas) and the intermittency of renewable electricity

sources.

Low-cost electricity to consumers. Based on NEI’s analysis of a July 2015

Brattle Group report on nuclear power benefits, Millstone’s operation keeps

wholesale electricity prices 12 percent lower in New England than they would

be if the plant closed. Millstone is the largest generator of electricity in Con-

necticut and New England. Millstone generates enough power to satisfy 58.9

percent of Connecticut’s electricity demand, or 14.4 percent of New England’s

electricity demand.

Tax impacts. Operating Millstone is estimated to contribute approximately $40

million in local and state taxes.

Millstone’s operation

results in over $13 billion

in economic benefits over

the next 15 years from

operations. Millstone also

keeps electricity prices

lower, which adds billions

more in economic

benefits.

Millstone prevents

emissions of 8.3 million

metric tons of carbon

dioxide annually,

approximately the same

amount of carbon dioxide

released by approximately

1.9 million cars each year.


Section 1

Background and Generation History

The Millstone Power Station (Millstone) is located on a 535-acre site

near New London, Connecticut. It consists of two operating Pressurized

Water Reactors (PWRs) that produce 2,111 MW of non-emitting base-

load power. This site is also home to Millstone Unit 1, a Boiling Water

Reactor (BWR) that ceased operations in 1998. The operator of Mill-

stone, Dominion, owns 100 percent of Millstone Unit 2 and 93.47 per-

cent of Millstone Unit 3. Massachusetts Municipal Wholesale Electric

Company owns 4.8 percent and Green Mountain Power Corporation

owns 1.73 percent of Millstone Unit 3.

Reliable Electricity Generation

Millstone 2 and 3 operated at a capacity factor of approximately 96 per-

cent in 2015, above the industry average. Capacity factor, a measure of

electricity production efficiency, is the ratio of actual electricity generat-

ed to the maximum possible electric generation during the year.

Thousands of Local Jobs

Millstone employs 1,569 full-time workers, and supports an additional

1,691 jobs in Connecticut and New England from operations.1 The annu-

al payroll and benefits are approximately $180 million, and millions more

for contract labor. Most jobs at nuclear power plants require technical

training and are typically among the highest-paying jobs in the area.

Nationwide, nuclear energy jobs pay 36 percent more than average sal-

aries in a plant’s local area.2

Lower electricity prices also stimulate job creation in Connecticut and

New England by enabling consumers and businesses to spend less on

electricity and more in other parts of the economy. These lower prices stimulate

a further 8,850 jobs in Connecticut and New England.

Safe and Clean for the Environment

Nuclear energy facilities generate large amounts of electricity without emitting

greenhouse gases. State and federal policymakers recognize nuclear energy as

an essential source of safe, reliable electricity that meets both environmental

needs and demand for electricity.

1 For the purposes of this report, “New England” or the “Rest of New England” consists of Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont.

2Nuclear Energy’s Economic Benefits—Current and Future. Nuclear Energy Institute, April 2014.


First dates of commercial operation Millstone 2 - 1975 Millstone 3 - 1986

Location In Waterford, Conn., 40 miles Southeast of Hartford, Conn.

License Expiration Years

Millstone 2 - 2035 Millstone 3 - 2045

Reactor Types Pressurized water

Total Electrical Capacity (Megawatts)

Millstone 2 - 884 Millstone 3 - 1,227


Millstone, like all nuclear power plants, produces baseload power that is carbon-

free. As the largest generation station in New England at 2,111 megawatts of

capacity, Millstone produced 17.4 million megawatt hours of electricity that

avoided the emission of over 8.34 million metric tons of CO2 in 2015.3 Overall,

Connecticut’s electric sector emits approximately 7 million metric tons of carbon

dioxide annually. According to ISO-New England, New England’s power sector

(including Connecticut) emitted approximately 30 million metric tons of CO2 in

2015.4

Recently, New York State established a Clean Energy Standard that places a

value on carbon-free electricity based on the Social Cost of Carbon values. In

August 2016, the U.S. Court of Appeals for the Seventh Circuit validated the

Social Cost of Carbon as a legitimate method for placing a value on the benefits

of carbon reduction.5 Between 2016 and 2030, assuming Millstone avoids 8.34

million metric tons a year, these avoided emissions would represent an avoided

cost of $6.2 billion in cumulative benefits.6

Millstone also prevents the release of other air pollutants such as nitrogen oxide

and sulfur dioxide, which are precursors to acid rain and urban smog. These

compounds are limited by federal regulations. In 2015, the plant avoided the

emission of 2,500 tons of nitrogen oxide and 2,400 tons of sulfur dioxide.

3 Emissions prevented are calculated using regional fossil fuel emission rates from the U.S. Environ-mental Protection Agency and plant generation data from the U.S. Energy Information Administra-tion. 4 Patricia Silva, ISO-NE Senior Analyst of System Planning, “Environmental Update to the Planning Advisory Committee.” ISO-New England, February 17, 2016.

5 Zero Zone, Inc., et al., v. U.S. Department of Energy

6 The Social Cost of Carbon values are from the Technical Update of the Social Cost of Carbon for

Regulatory Impact Analysis Under Executive Order 12866, Interagency Working Group on Social Cost of Carbon, United States Government, July 2, 2015. The values are in 2007 dollars and were inflated using the GDP deflator to 2015 dollars. The calculation is based on the carbon intensity of generation in ISO-New England.

By producing carbon-free

electricity, Millstone

provides $6.2 billion in

benefits from reduced

carbon emissions.


Section 2

Economic and Employment Benefits

for State and Regional Economies from

Millstone Operations

NEI used the REMI PI+ model to analyze economic and expenditure data

provided by Dominion to develop estimates of its economic benefits from Mill-

stone Power Station’s (Millstone) operations. More information on REMI can be

found in Section 4.

The economic impacts of Millstone discussed in this section consist of the fol-

lowing variables that are used to analyze these impacts:

Output

Output is a value of economic activity. The direct output is the economic activity

produced by Millstone. The secondary output is the value of the economic activi-

ty generated in other industries because of Millstone as well as how people em-

ployed at the facility influence the demand for goods and services within the

region.

Employment

The direct employment is the number of jobs at Millstone. Secondary employ-

ment is jobs in other industries as a result of Millstone’s operations.

Gross State Product

Millstone contributes to Connecticut’s Gross State Product, which is the value of

goods and services produced by labor and property—sales (output) minus inter-

mediate goods. In the REMI model, electricity is the final good from a nuclear

plant. Intermediate goods are the components purchased to make that electrici-

ty.

State and Regional Economic Effects

Millstone’s total economic output impact on Connecticut is estimated to be $870

million. In other words, for every dollar of output from Millstone, the state pro-

duced $1.20. Including economic impact on the rest of New England, Millstone

provides nearly $954 million in direct and secondary economic impact. Millstone

also contributes about $637 million to Connecticut’s gross state product each

year.



Table 2.1 summarizes the plant’s effects on Connecticut and New England

economies and GSP in 2017 from operations. Millstone’s operations have a sub-

stantial economic impact on other industries in Connecticut and elsewhere in

New England.

Millstone’s output also stimulates the state’s and region’s labor income and em-

ployment. The plant employs 1,060 people in permanent jobs and 509 contrac-

tors.7 These jobs stimulate nearly 1,700 additional jobs in Connecticut and New

England. Table 2.2 details the quantity and types of jobs that Millstone sup-

ports. Plant workers are included in the occupation categories in the table.

Millstone’s operation resulted in an estimated total tax impact of approximately

$40 million to local and state governments.8 This is the direct impact that sup-

ports the funding of local schools, police, fire departments, and other important

public services. There also are secondary impacts, because Millstone’s expendi-

tures increase economic activity, leading to additional income and value crea-

tion and, therefore, to higher tax revenue.

Table 2.1 Millstone’s Impact on the Connecticut and New England Economies in 2017

(dollars in 2015 millions) 9

Description Direct Secondary Total

Connecticut

Output $729 $144 $873

Gross State Product $637

Rest of New England

Output $81 $81

Gross Domestic Product $51

7 The 509 contractors are based on a three-year average of hours billed by contract labor to

calculate an average full-time equivalent number. 8

Calculated based on a percentage of gross state product. 9

Total output and gross domestic product for the Rest of New England are based on the direct operations of Millstone.

Walkway constructed by Millstone volunteers.


Table 2.2 Job Impacts from Millstone Operations

Category Connecticut Rest of N.E. Total

Utilities 1,569 0 1,569

Retail Trade 260 46 306

Health Care and Social Assistance 216 54 270

Other Services, except Public Administration 187 82 269

Professional, Scientific, and Technical Services 106 114 220

Accommodation and Food Services 97 32 129

Administrative and Waste Management Services 48 28 76

Finance and Insurance 51 24 75

Real Estate and Rental and Leasing 46 14 60

Educational Services 30 22 52

Manufacturing 17 34 51

Other Industries 110 73 183

Total 2,737 523 3,260


Section 3

Economic and Employment Benefits for State

and Region from Lower Electricity Prices

This report also analyzes the economic benefits of lower electricity prices from

the operation of Millstone Power Station (Millstone). Again, NEI used the REMI

PI+ model for the analysis. The inputs were estimated using price increase infor-

mation from a Brattle Group report of July 2015 on nuclear power benefits. The

Brattle Group found that prices in New England would increase 24 percent with-

out nuclear power.10 Millstone forms 52 percent of New England’s nuclear capaci-

ty. This analysis assumes that the cost increases are linear, and wholesale prices

would therefore increase by 12 percent, or $6.83/MWh, without Millstone. Across

Connecticut and New England, residential consumers would see their costs in-

crease by $323 million and commercial and industrial consumers would see costs

increase by $490 million without Millstone.

The economic impacts of lower electricity prices from Millstone operations dis-

cussed in this section consist of the following main variables:

Output: The output discussed in this section is the economic activity created by

lower electricity prices in Connecticut and New England. High electricity prices

create a potentially adverse impact on businesses and industry that could lead to

lost economic activity. Households would also have less discretionary income to

spend on goods and services if their electricity bills increased.

Employment: Lower electricity prices support jobs in Connecticut and New Eng-

land. Higher costs to business operations could force companies to reduce the

numbers of employees or move out of the region.

State and Regional Benefits of Low-Cost Electricity

A detailed depiction of Millstone’s impact on a variety of economic sectors is in

Table 3.1. In Connecticut, finance and insurance, manufacturing, and utilities

benefit most. Other industries receiving substantial benefits are real estate,

health care and retail trade. In New England, low-cost electricity stimulates sub-

stantial activity in manufacturing, finance and insurance, and real estate. Many

other sectors benefit as well, such as utilities, health care and retail trade.

Table 3.2 depicts additional jobs by sector that are supported because of the

lower electricity prices because of Millstone’s operations. Millstone supports 2,062

jobs in Connecticut and a further 6,784 jobs in the rest of New England. Alt-

hough not modeled in this analysis, low electricity prices increase economic activ-

ity, leading to additional income and value creation and, therefore, to higher tax

revenue for communities supporting local services such as police, fire fighting

and education.

Millstone employees volunteering in the community.

By keeping electricity

prices lower, Millstone

supports substantial

economic activity and jobs.

Nearly $1.7 billion in

economic activity and over

8,800 jobs are supported

annually due to lower

electricity prices.

10 The Nuclear Industry’s Contribution to the U.S. Economy. The Brattle Group, July 2015.


Table 3.1 Millstone’s Estimated Total Impact in 2017 from Lower Electricity Prices

(output in millions of 2015 dollars)

Occupation Connecticut Rest of N.E. Total

Manufacturing $57 $220 $277

Finance and Insurance $67 $151 $218

Real Estate and Rental and Leasing $39 $141 $180

Utilities $49 $118 $167

Health Care and Social Assistance $31 $102 $133

Retail Trade $30 $93 $123

Information $20 $78 $98

Professional, Scientific, and Technical Services $20 $71 $91

All Other Industries $89 $279 $368

Total $402 $1,253 $1,655

Table 3.2 Job Impacts from Lower Electricity Prices

Category Connecticut Rest of N.E. Total

Retail Trade 331 1,078 1,409

Health Care and Social Assistance 323 1,038 1,361

Other Services, except Public Administration 217 676 893

Accommodation and Food Services 185 679 864

Finance and Insurance 213 490 703

Manufacturing 108 466 574

Professional, Scientific, and Technical Services 116 384 500

Administrative and Waste Management Services 109 356 465

Real Estate and Rental and Leasing 87 299 386

Arts, Entertainment, and Recreation 63 229 292

Wholesale Trade 60 210 270

All Other Industries 250 879 1129

Total 2,062 6,784 8,846


Section 4

Economic Impact Analysis Methodology

This analysis uses the REMI PI+ model to estimate the economic and fiscal

impacts of the Millstone Power Station.

Regional Economic Models, Inc. (REMI)

REMI is a modeling firm specializing in services related to economic impacts

and policy analysis, headquartered in Amherst, Mass. It provides software,

support services, and issue-based expertise and consulting in almost every

state, the District of Columbia, and other countries in North America, Europe,

Latin America, the Middle East and Asia.

The REMI model has two main purposes: forecasting and analysis of

alternatives. All models have a “baseline” forecast of the future of a regional

economy at the county level. Using “policy variables,” in REMI terminology,

provides scenarios based on different situations. The ability to model policy

variables makes it a powerful tool for conveying the economic “story” behind

policy. The model translates various considerations into understandable

concepts like GDP and jobs.

REMI relies on data from public sources, including the Bureau of Economic

Analysis, Bureau of Labor Statistics, Energy Information Administration and the

Census Bureau. Forecasts for future macroeconomic conditions in REMI come

from a combination of resources, including the Research Seminar in

Quantitative Economics at the University of Michigan and the Bureau of Labor

Statistics. These sources serve as the main framework for the software model

needed to perform simulations.

Policy Insight Plus (PI+)

REMI’s PI+ is a computerized, multiregional, dynamic model of the states or

other sub-national units of the United States economy. PI+ relies on four

quantitative methodologies to guide its approach to economic modeling:

1. Input/output tabulation (IO)—IO models, sometimes called “social

accounting matrices” (SAM), quantify the interrelation of industries and

households in a computational sense. It models the flow of goods between

firms in supply-chains, wages paid to households, and final consumption

by households, government and the international market. These channels

create the “multiplier” effect of $1 going further than when accounting for

its echoing.


2. Computable general equilibrium (CGE)—CGE modeling adds market

concepts to the IO structure. This includes how those structures evolve

over time and how they respond to alternative policies. CGE incorporates

concepts on markets for labor, housing, consumer goods, imports and

the importance of competitiveness to fostering economic growth over

time. Changing one of these will influence the others—for instance, a

new knife factory would improve the labor market and then bring it to a

head by increasing migration into the area, driving housing and rent

prices higher, and inducing the market to create a new subdivision to

return to “market clearing” conditions.

3. Econometrics—REMI uses statistical parameters and historical data to

populate the numbers inside the IO and CGE portions. The estimation of

the different parameters, elasticity terms and figures gives the strength

of various responses. It also gives the “time-lags” from the beginning of a

policy to the point where markets have had a chance to clear.

4. New economic geography—Economic geography provides REMI a sense

of economies of scale and agglomeration. This is the quantification of the

strength of clusters in an area and their influence on productivity. One

example would include the technology and research industries in Seattle.

The labor in the area specializes to serve firms like Amazon and Microsoft

and, thus, their long-term productivity grows more quickly than that of

smaller regions with no proclivity towards software development (such as

Helena, Mont.). The same is true on the manufacturing side with physical

inputs, such as with the supply-chain for Boeing and Paccar in Washing-

ton in the production of transportation equipment. Final assembly will

have a close relationship and a high degree of proximity to its suppliers

of parts, repairs, transportation and other professional services, which

show up in clusters in the state.


Conclusion

Total Economic and Employment Impacts

NEI’s analysis finds that Millstone generates more than $2.6 billion in annual

economic output for New England through its operations and through lower

regional electricity prices. This includes almost $1.3 billion for Connecticut and

more than $1.3 billion for the other states in New England (including Maine,

Massachusetts, New Hampshire, Rhode Island, and Vermont) from both opera-

tions and lower electricity prices.

Additionally, NEI’s analysis finds that Millstone supports more than 12,100 jobs

annually in New England through its operations and through lower electricity

prices. This includes almost 4,800 jobs in Connecticut and more than 7,300

elsewhere in New England from both operations and lower electricity prices.

Economic Impacts from Operations and Lower Prices

Specifically, the estimated annual economic impacts (direct and secondary) for

all of New England from Millstone’s operations exceed $950 million annually.

This includes more than $870 million in Connecticut and more than $80 million

in the other New England states. Millstone’s operations also contribute $630

million annually to Connecticut’s gross state product.

The lower energy prices supported by the station also produce significant bene-

fits for New England totaling more than $1.65 billion in additional economic

activity annually. This includes more than $400 million in Connecticut and ap-

proximately $1.25 billion in other New England states.

Additionally, the operation of the Millstone plant and its secondary effects ac-

count for almost 3,300 jobs annually throughout Connecticut and the rest of

New England, including more than 2,700 jobs in Connecticut and more than

500 in the other states in New England.

The lower energy prices supported by Millstone also act to create jobs. NEI’s

analysis finds that these lower prices support more than 8,800 jobs annually

throughout New England, including more than 2,000 in Connecticut and almost

6,800 in the rest of the region.

Further benefits of Millstone

The station’s economic benefits—on taxes and through wages and purchases of

supplies and services—are considerable. In addition, plant employees further

stimulate the local economy by purchasing goods and services from businesses

around the area, supporting many small businesses in Connecticut and else-

where in New England.

The facility generated 17.4 billion kilowatt-hours of emission-free electricity in

2015, enough to serve the yearly needs for almost two million homes, all while

producing carbon-free power. This carbon-free electricity is estimated to pro-

vide over $6 billion in health benefits over the next 15 years.

The Millstone Power Station is a leader economically, fiscally, environmentally

and socially within Connecticut and has far-reaching economic impacts across

the Northeast.

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